While many next-generation applications are moving toward public clouds, virtualization of traditional applications and workloads is set to grow as well. Opportunities for expansion remain in key verticals and emerging markets, and 80% of physical x86 servers and 50% of enterprise workloads remain unvirtualized, per industry estimates [...] We think solid demand trends in the channel reflect the remaining white space in server virtualization. In our view, this remaining room can support a middle-teens growth rate for VMware until its emerging solutions for software-defined data centers, hybrid clouds and mobility help reaccelerate overall growth.

Walter Pritchard with Citigroup reiterates a Neutral rating, writing that he’s “confident” the company can meet his estimate for $1.187 billion in revenue, and that despite warnings of late from F5 Networks (FFIV) and Fortinet (FTNT), “inputs point to stable trends and good execution in the U.S. offsetting the expected softness in [Europe, the Middle East and Africa].”

Pritchard is modeling Q2 revenue of $1.25 billion to $1.27 billion — the consensus is $1.257 billion — and expects VMware to maintain its full year outlook of $5.12 billion to $5.24 billion.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.